EXTENSION OF CREDIT FACILITIES TO INDUSTRIES IN EPZS

(Bangladesh Bank FE Circular No. 9, dated 23 January 1984)

It has since been decided that Type-A industries of the Bangladesh Export Processing Zones would be allowed to obtain short term repatriable foreign currency loans from overseas banks and financial institutions against mortgage / hypothecation of fixed and other assets subject to prior clearance from the Bangladesh Bank.

(i) The Type-A industry of the EPZs will submit their application through any authorized dealer detailing the terms and conditions of the repatriable foreign currency loans for prior approval of the Bangladesh Bank.

(ii) The assets against which charge will be created have to be fully owned by the Type-A industry in Bangladesh.

(iii) After obtaining prior approval from the Bangladesh Bank, the authorized dealer may credit the amount of the short term foreign currency loans in the FC accounts of Type-A industries maintained by them in terms of para 4 of FE Circular No. 37 of 1983. The above FC account may also be freely debited for-

(a) Making remittances abroad for importation of capital machinery and raw materials, payment of interest, service charges and repayment of loan etc. and
(b) For crediting Taka account maintained by the Type-A industries for meeting their local expenses.

(iv) The above loans will not get any forward cover facility against fluctuation in exchange rates of Taka.

(v) In case, the short term repatriable foreign currency loan is called up by the creditor, the fixed and other assets fully owned by the Type-A industry and charged to the foreign financing bank will be allowed to be sold and proceeds thereof repatriated subject to the conditions that-

(a) the assets are sold in foreign exchange
(b) all liabilities in Bangladesh are paid off and
(c) prior approval of the Bangladesh Bank is obtained. No remittance from the country's foreign exchange or under Wage Earner's Scheme will be allowed for this purpose.
(vi) Type-B industries of the Export Processing Zones would also be allowed to obtain short term repatriable foreign currency loans from overseas banks and financial institutions subject to prior clearance from the Bangladesh Bank. All procedures as applicable in this regard in case of Type-A industries have also to be observed for Type-B industries. But the Type-B industries will not be permitted to mortgage / hypothecate their fixed assets or raw materials to anyone outside Bangladesh. The authorized dealers may, however, issue guarantee to overseas banks and financial institutions for the short term repatriable foreign currency loans brought in to Bangladesh by the Type-B industries subject to prior approval of the Bangladesh Bank.
2. The authorized dealers may also grant Taka loans to Type-B industries up to 100% of any short term foreign currency loan brought into Bangladesh subject to prior clearance of the Bangladesh Bank. Taka loans on matching basis can be allowed only if the foreign currency proceeds of the loan is converted into Taka and not credited to any FC account. The Type-B industries of the EPZs will submit their applications for this purpose through any authorized dealer detailing the terms and conditions in this regard for prior clearance from the Bangladesh Bank.
(i) Type-B industries will not be permitted to mortgage / hypothecate their fixed assets / raw materials to anyone outside Bangladesh for Taka loans also.
(ii) Type-B industries will not be allowed to take forward cover facility for the Taka loans for a maximum period of six months against fluctuation in exchange rate of Taka as admissible under FE Circular No. 26 of 1983.
(iii) The above Taka loans against repatriable short term foreign currency loans will not be allowed to type-A industries.
3. The authorized dealers may extend credit facilities to Type-C industries as admissible to such industries outside EPZs.
4. Bringing in and repatriation of all foreign currency loans including payment of interest will require the prior approval of the Bangladesh Bank. No prior approval would, however, be necessary for such repatriation if the remittances are made out of the foreign currency accounts maintained by Type-A and Type-B industries of the EPZs where such / foreign currency accounts are maintained in terms of para 4 of FE Circular No. 37 of 1983. Repayment of principal or payment of interest will be allowed out of the industries own resources only. No resources borrowed or acquired in Bangladesh would be allowed to be utilized for this purpose.
5. To meet the credit needs of the garments industries of the Bangladesh Export Processing Zones, it has been decided to extend the back-to-back L / C facility to the garments industries of the EPZs also. All instructions as contained in circular letter No. ECP Com. 241 / A-3050, dated 5.12.1982 will apply in case of garments industries of the EPZs also. In addition, the authorized dealers should satisfy themselves that necessary arrangements have been made by the opener so that in case of any shortfall or delay, necessary foreign exchange would be made available

(i) The Type-A industry of the EPZs will submit their application through any authorized dealer detailing the terms and conditions of the repatriable foreign currency loans for prior approval of the Bangladesh Bank.

(ii) The assets against which charge will be created have to be fully owned by the Type-A industry in Bangladesh.

(iii) After obtaining prior approval from the Bangladesh Bank, the authorized dealer may credit the amount of the short term foreign currency loans in the FC accounts of Type-A industries maintained by them in terms of para 4 of FE Circular No. 37 of 1983. The above FC account may also be freely debited for-

(a) Making remittances abroad for importation of capital machinery and raw materials, payment of interest, service charges and repayment of loan etc. and
(b) For crediting Taka account maintained by the Type-A industries for meeting their local expenses.

(iv) The above loans will not get any forward cover facility against fluctuation in exchange rates of Taka.

(v) In case, the short term repatriable foreign currency loan is called up by the creditor, the fixed and other assets fully owned by the Type-A industry and charged to the foreign financing bank will be allowed to be sold and proceeds thereof repatriated subject to the conditions that-

(a) the assets are sold in foreign exchange
(b) all liabilities in Bangladesh are paid off and
(c) prior approval of the Bangladesh Bank is obtained. No remittance from the country's foreign exchange or under Wage Earner's Scheme will be allowed for this purpose.
(vi) Type-B industries of the Export Processing Zones would also be allowed to obtain short term repatriable foreign currency loans from overseas banks and financial institutions subject to prior clearance from the Bangladesh Bank. All procedures as applicable in this regard in case of Type-A industries have also to be observed for Type-B industries. But the Type-B industries will not be permitted to mortgage / hypothecate their fixed assets or raw materials to anyone outside Bangladesh. The authorized dealers may, however, issue guarantee to overseas banks and financial institutions for the short term repatriable foreign currency loans brought in to Bangladesh by the Type-B industries subject to prior approval of the Bangladesh Bank.